Canada's Immigration Policy: a Focus on Human Capital

September 15, 2011

Profile

By A.E. Challinor

Jason Kenney, Canada's Minister of Citizenship, Immigration, and Multiculturalism, meets with new Canadian citizens.

A net immigration country since its inception, Canada has a long and rich experience of immigrants and immigration that is deeply embedded within its sense of nationhood. Foreign-born permanent residents are more than 20 percent of the country's population, and newly arrived immigrants now account for more than 50 percent of annual population growth. Current immigration trends mark the enormous contribution immigrants make to the nation's ethnocultural composition and, perhaps more significantly, to its labor force.

Today, the goal of the immigration system is to encourage youthful, bilingual, high-skill immigration in order to build human capital within Canada's aging labor force. In order to attract the right type of migrants, Canada has set in place certain education and skills provisions that work to advantage potential migrants who have work experience, higher education, and English or French language abilities.

But questions of fairness have been raised given that there appear to be workforce barriers, such as credential recognition and strong demand for sophisticated language and literacy competency, which impede access to skilled employment and social mobility among some newcomers.

Mounting evidence also shows there are systemic barriers in the labor market and an inability among many recent highly skilled newcomers to find employment that is commensurate with their education and experience, resulting in a significant amount of brain waste.

The apparent mismatch between the skills and education levels of economic-class migrants and labor market performance in Canada is a concern that highlights both integration challenges in the post-industrial economy and a sharp division between immigration policy intent and outcomes.

As the country debates the ability of younger generations to support an aging population, the size of the labor force and tax base necessary to maintain economic growth, and the population's ideal cultural and linguistic composition, Canadians are reevaluating the goals of the immigration system and the direction in which they want it to help lead their society.

Canada's Evolving Immigration Policy

Canada began to adopt policy measures to manage immigration in the late 19th century. In a departure from the relatively free entry permitted from 1867 to 1895, a host of new policies formalized the Canadian immigration system while restricting admission to "white" American, British, and European applicants — to the exclusion of migrants from the rest of the world who could not trace their racial or ethnic origins to Europe. These policies included a number of orders-in-council (administrative decisions issued by the government), the Immigration Acts of 1910, 1919, and 1952, and the Chinese Immigration Act of 1923.

Beginning in 1962, however, regulatory changes were introduced that overturned the most blatantly racist dimensions of Canadian immigration policy. In 1967, a points system was introduced to determine immigrant eligibility with preference given to educated French and English speakers of working age. A little more than a decade later, the Immigration Act of 1976 (which was rewritten entirely rather than modified from an older version) officially made Canada a destination for migrants from all countries. The new act was constructed around three pillars of admission: independent applicants assessed on the basis of points awarded for employment skills, education, and language abilities rather national or "racial" origin; sponsorship by close family members; and refugee status.

The 1976 act, which emphasized family reunification and humanitarian concerns over economic interests, was replaced in 2001 with the Immigration and Refugee Protection Act, a policy that stresses education, language, and adaptability. Those applicants with trade certificates and second degrees are awarded more points, and experience points are skewed to favor younger workers.

The 2001 act has begun to influence migration flows to Canada and has generated public debate about the capacity of the Canadian economy to absorb a large number of highly skilled migrants. Highly educated immigrants typically gain entry through the economic class, which now makes up more than 60 percent of all admitted immigrants.

Since the introduction of the points system in 1967, Canada has sought to target its immigration benefits toward potential immigrants with characteristics that coincide with Canada's evolving needs and interests. With the introduction of the Immigration and Refugee Act in 2001, new classes and procedures were created in order to further Canada's goal of building human capital:

Federal Skilled Worker Program

The Federal Skilled Worker Program (FSWP) is responsible for 81 percent of all economic immigrant admissions and 46 percent of total admissions. Skilled workers must have at least one year of work experience in professional, managerial, or skilled trade/technical occupations in order to qualify for the program, and are evaluated based on other points-system criteria — education, age, proficiency in English or French, and adaptability.

Temporary Worker Program

Originally designed for skilled labor shortages primarily in the Alberta oil patch, in 2002 the government expanded the temporary worker program to include hospitality, food, construction, and manufacturing. This has led to an expansion in the number of temporary workers admitted to Canada from 160,908 in 2006 to 283,096 in 2010. However, the Auditor General of Canada has expressed concern that the program lacks oversight to prevent fraud and ensure that employers comply with the terms of employment.

Arranged Employer Opinion

The process of an Arranged Employer Opinion (AEO) begins with an employer making a job offer to a foreign worker, at which time the employer requests an AEO from Human Resources and Skills Development Canada. The wages and working conditions of the foreign worker must match those of a Canadian employee in a similar position, though the employer need not conduct a search to determine if a Canadian is available for the job. Having an AEO adds additional points towards the foreign worker's FSW criteria. There are some concerns about fraud and exploitation through false job claims, but federal skilled workers with AEOs tend to outperform those without AEOs in obtaining and retaining jobs and in terms of earned income.

While AEOs operate more like the U.S. system of high-skill immigration and are perceived as a potential solution to the problem of brain waste, the FSWP is more focused on sustainability and long-term integration into Canadian society, and tends to attract immigrants who are more adaptable to the changing labor market.

Provincial Nominee Program

Under the Provincial Nominee Program (PNP), a foreign worker is nominated by a province for a work permit based on criteria set by the province itself. This program aims to distribute the human capital gained through immigration outside of the major migrant hubs of Toronto, Vancouver, and Montréal by addressing labor or skills shortages in individual provinces. In 2002, only 1.5 percent of all economic-stream migrants were provincial nominees, but that number jumped to 15 percent in 2008.

The Manitoba government has used the PNP to notable effect; 75 percent of newcomers — or approximately 13,500 persons — came to Manitoba through the PNP in 2009, compared with just 477 in 1999. In fact, between 1999 and 2008, half of all PNP nominees in Canada were sponsored by Manitoba. By the year 2012, Manitoba is expected to nominate 40,000 migrants for the PNP, surpassing the number of immigrants entering the province under the Federal Skilled Worker Program. However, while 84 percent of Manitoba's nominees find employment within the first three months, their initial jobs do not necessarily match their intended occupations.

The PNP is designed to act as a compliment to the FSWP, not merely as an immigration mechanism for the provinces. While the FSWP admits long-term highly skilled professionals, the PNP generally admits shorter-term migrants for specific occupations. The FSWP is generally viewed as less responsive to labor market needs than the PNP, as applicants to the FSWP are subject to longer processing times.

The PNP was preceded by the 1991 Canada-Quebec Accord, which granted full responsibility for the selection of economic immigrants and refugees to Quebec — as well as corresponding linguistic, cultural, and economic integration services — to the provincial government. This accord is still in place today.

The result of the expansion of economic migration programs has been a change in the types of immigrants entering Canada. In the mid 1980s, approximately 50 percent of immigrants were admitted based on family preferences, 30 percent were economic migrants, and 18 percent were refugees. By 2009, 38.1 percent of all temporary and permanent admissions were in the family reunification class, 46.9 percent were in the economic class, 8.6 percent were refugees, and just over 6 percent were classified as "other", a class including those admitted on humanitarian or compassionate grounds and provincial/territorial nominees.

Refugee and Asylum Policy

Since the end of World War II, Canada has accepted refugees. Although the country participated in three major refugee movements between 1945 and 1970 — displaced persons in the years immediately following the war, Hungarian refugees between 1956 and 1957, and Czech refugees in 1968 — and admitted refugees on an individual, ad hoc basis, it did not accede to either the 1951 United Nations Convention Relating to the Status of Refugees or the 1967 Protocol Relating to the Status of Refugees until 1969.

It is therefore only since the early 1970s that refugees have been a constant component of the immigration program. Canada formally organized its refugee policies and management structures in the 1976 act, thereby institutionalizing an ongoing commitment to fulfill legal obligations toward refugees. The 2001 act continues this practice by placing an even stronger emphasis on the need for protection and less on an applicant's ability to settle in Canada.

In the past decade, Canada has become one of the top three refugee resettlement countries in the world. The United Nations High Commissioner for Refugees estimates that there are currently 230,604 refugees and asylum-seekers present in Canada. In 2010, Canada admitted 7,265 government-sponsored and 4,833 private-sponsored refugees, representing a 63 percent increase over 2005; combined with those protected persons already in Canada, a total of approximately 23,000 refugees were admitted that year. As of December 31, 2010, there were 51,000 pending asylum claims.

Over the past 15 years, the proportion of refugees from Europe has steadily declined (from 34.4 percent in 1994 to 8.3 percent in 2009), while the proportions from the Middle East, Africa, and Asia have steadily grown. The top five source countries for refugees resettled in Canada in 2006 were Afghanistan, Colombia, Ethiopia, Burma, and Sudan. In 2009, 13 percent of refugees originated in the Asia/Pacific region, and another 13 percent in Central and South America.

The Immigrant Population in Canada

As of 2008, 6,471,900 foreign-born permanent residents lived in Canada, representing just over 20 percent of the total population — the highest proportion since 1931. Comparatively, the corresponding proportion of immigrants in the United States in 2009 was 12.5 percent of the total population. Between the 2001 and 2006 censuses, the foreign-born population in Canada grew by 13.6 percent, while the Canadian-born grew by only 3.3 percent. Immigration was responsible for more than two-thirds of population growth between those two censuses, fueling an overall population growth rate of 5.4 percent per year.

The pattern of immigration to Canada, however, has been far from steady, with highs and lows punctuating the country's 150-year migration history. Thanks to a booming economy and vast expanses of unpopulated land, the years 1910 to 1913 marked the high-water point with an average of 286,000 migrants arriving annually and 400,870 in 1913 alone. The influx of immigrants later dipped considerably during and immediately after World War II, and subsequent economic cycles caused dips and spikes in immigration throughout the latter part of the 20th century.

In the 1990s, Canada pursued a more aggressive immigration program with about 200,000 people — primarily skilled economic migrants entering under the points system — arriving annually. Since that time, targets continue to be set around the quarter-million mark, with little indication of impending radical change.

The vast majority of immigrants choose to become Canadian citizens after the three-year waiting period for naturalization eligibility has elapsed. In 2006, 85.1 percent of eligible immigrants naturalized, an increase over 2001. Currently, only 1 percent of immigrants to Canada continue onward to the United States.

Immigrant Origins

One of the most vivid manifestations of change in recent decades has been in the origins of immigrants to Canada. Once a country dominated by migration from the United Kingdom and Europe, today Canada accepts immigrants from every part of the globe, with the largest flows coming from countries in South and East Asia.

Between 1956 and 1976, 63.6 percent of immigrants came from the United Kingdom and Europe, while only 11.9 percent came from Asia. By 2006, however, Asia and the Middle East had for the first time surpassed Europe and the United Kingdom as not only the top source region of recent immigrants, but of all foreign-born in Canada.

Over 40 percent of Canada's foreign-born population is from the Middle East and Asia, compared to 37 percent from Europe. Six in ten recent immigrants were from Asia, with China as the largest immigrant sending country at 14 percent of the total. Of the top five countries of birth for immigrants in Canada in 2009, four were in Asia: China, India, the Philippines, and Pakistan (the United States is the fifth). Romania is the largest European sender, surpassing the United Kingdom by 0.2 percent in 2006.

The large number of Asian immigrants, especially from the People's Republic of China, Hong Kong, and India, is due in large part to the Canadian government's emphasis on skills, education, and language abilities in its selection formula for independent applicants, as well as subsequent sponsorship of family dependents.

Immigrant Settlement Patterns

Unlike the first 50 years of Canadian history when many, if not most, immigrants settled in agricultural, rural, or frontier areas, today the vast majority of migrants settle in one of Canada's three largest cities and metropolitan areas: Toronto, Montréal, and Vancouver.

Immigration and ethnocultural diversity in many ways are metropolitan, rather than national, aspects of life in Canada. In 2006, 63 percent of all immigrants, regardless of period of immigration, lived in the three largest census metropolitan areas. In contrast, only 27 percent of the Canadian-born population lived in these cities in 2006. Other metropolitan areas have also seen greater numbers of immigrants, including census-to-census gains in Calgary, Edmonton, London, and Winnipeg. In contrast, only 5 percent of immigrants live in rural areas, compared to 22.5 percent of the native born.

In the largest cities, the foreign-born population is substantial — 45.7 percent of Toronto's population was born abroad, making it one of the most important sites of immigrant settlement in North America. In contrast, the foreign born constitute only 35.7 percent of the New York City metropolitan area population.

Similarly, 39.6 percent of Vancouver's population and 20.3 percent of Montréal's were born outside of Canada. In Québec, Montréal is truly the immigration metropolis; almost 90 percent of all immigrants in the province live in metropolitan Montréal, thanks in part to the draw of its large anglophone population.

The immigrant populations in the three major metropolitan areas of Canada are extremely diverse, though a large number of francophone immigrants have settled in french-speaking Québec and Montréal in particular, while immigrants from Asia have been drawn to Toronto and Vancouver. Among recently arrived immigrants (2001-2006), individuals from North Africa, Haiti, and other French-speaking regions are highly represented in Montréal; migrants from India, China, and the Caribbean are numerous in Toronto; and large shares of immigrants from China, India, and Hong Kong are found in Vancouver.

A study by Statistics Canada based on population projection scenarios to 2017 emphasizes the degree to which immigration will change the ethnocultural characteristics of large Canadian cities. The study estimates that 95 percent of "visible minorities" (defined by the Employment Equity Act as persons, other than Aboriginal persons, who are not Caucasian in race or nonwhite in color) will live in a large metropolitan area, and 75 percent will be in Montréal, Toronto, and Vancouver.

Estimates also suggest that by mid-decade Toronto and Vancouver will become "majority-minority" cities, in which the visible minority population — many of whom are foreign born — will become the majority of residents. Overall, Canada is projected to be one-third visible minority by 2031.

Immigrant Skills and Education

Immigrants in Canada tend to be highly educated, in part reflecting the fact that today the majority of those who come to the country do so through economic-class streams. About half of immigrants hold a university degree, compared to just 21 percent of the Canadian-born population. Among the Canadian born, more women than men hold a university degree (71 percent to 65 percent), whereas the degree distribution among immigrants in 2009 was equal.

Reflecting Canadian immigration policy selection criteria, the vast majority of employed recent immigrants report working in English, French, or a mixture of official and third languages. Only 13 percent of immigrants report working exclusively in a language other than English or French. Of the immigrants who arrived in 2009, 58 percent reported proficiency in English, compared to only 4.4 percent who spoke French and 32.9 who spoke neither.

Immigrants in the Workforce

In their first years after arrival, immigrants tend to have lower rates of labor market participation than the Canadian-born population. This is because a number of migrants spend time upgrading either professional, trade, or language skills, or are unable to find work that matches their skill and education levels.

In the first quarter of 2011, the unemployment rate for native-born Canadians was 6.3 percent, compared to 9.1 percent for all immigrants and 14.2 percent for recent immigrants. Eventually, the labor force participation rates of the foreign born converge with those of the Canadian-born population. For instance, 91 percent of male immigrants aged 25 to 44 who arrived in Canada between 1981 and 1991 participate in the labor force, while 92.5 percent of Canadian-born men in the same age bracket are in the labor force.

Yet many immigrants — particularly new arrivals — have difficulty fully participating, and are often underemployed or overly represented in low paying jobs. There is considerable concern about the ability of immigrants to quickly and easily convert their often high human capital and willingness to work into strong employment, earnings, and socioeconomic mobility.

A number of recent studies have found significant and sustained income differences between newcomers and the Canadian-born population. Among immigrants who arrived in the later part of the 1980s and throughout the 1990s, the gap in initial earnings relative to the Canadian-born population has steadily increased over time, and this gap does not appear to close quickly with length of time in the country. Statistics Canada found that 16.5 percent of immigrants were classified as "low income" for at least seven of their first ten years in the country, and all immigrants are more likely than native-born Canadians to be low income. Furthermore, even those immigrants who have lived in the country for ten years or more do not match the national average for earnings.

There is also a growing incidence of poverty among immigrants in Canada's largest cities. Although low-income rates among the Canadian born fell nationally during the 1990s and 2000s, the low-income rate of recent immigrants reached 3.2 times that of the native born in 2004, causing net Canadian low-income rates to rise. The rate also increased for immigrants who have lived in Canada for less than 20 years.

The increase in the low-income rate for recent immigrants occurred across the education spectrum, but was most significant among university-educated recent immigrants, with a +44 percent change between the 1996 and 2006 censuses. Many are unable to find work due to a mismatch between their foreign qualifications and the needs and desires of Canadian employers.

Moreover, a 2008 study found that 42 percent of immigrants aged 25 to 54 were overqualified for their work, holding higher educational qualifications than their jobs required. In contrast, only 28 percent of native-born Canadians were similarly overqualified. This problem is particularly prevalent among university-educated immigrants who arrived within the last five years. Even if they are able to find work, it is often in low-skill, low-income occupations.

The Great Recession

Even before the recent recession struck the global economy, immigrants in Canada were more likely than the native born to be unemployed. In 2006, the unemployment rate for Canadians was 4.9 percent, while for immigrants it was 11.5 percent — the rate was higher still among immigrant women.

The province of Ontario is home to 55 percent of Canada's labor force and has the highest proportion of immigrants in the labor force at 30 percent. At the peak of the recession (between October 2008 and October 2009), the unemployment rate of recent immigrants in Ontario was almost twice that of Canadian-born workers. The province is also home to many industries that support large numbers of new immigrant workers — such as construction, manufacturing, transportation, and warehousing — and were hardest hit by the recession. While more established immigrants initially saw an increase in their employment rates, as the recession wore on they, too, were outpaced by the Canadian average.

However, the government has affirmed its commitment to immigration and stated that the recession will not affect the intake of immigrants in the coming years. In fact, Canada accepted more immigrants in 2010 than originally planned (280,636 persons), including a 30 percent increase in foreign students over 2005.

Emigration and Return Migration

Canadian emigration, particularly to the United States, has long been a matter of concern. Brain drain was an especially hot topic in the 1990s, when a cohort of high-skill Canadians, primarily between the ages of 25 and 34, immigrated to the United States for greater professional opportunities, higher wages, and lower taxes. Particularly concerning for Canadian economists and policymakers was the concentration of these migrants in the fields of science, technology, and health care.

During this period, immigrants were even more likely than the Canadian born to immigrate to the United States, even those who had been in Canada for over a decade. There was some concern that the Canadian immigration system was not only unable to bring in enough talented people to replace those lost to the United States, but also unable to retain those it could bring in.

In response, recent Canadian governments have sought to reverse the trend of brain drain by building a knowledge economy — tailoring the immigration system to build human capital, spending millions of public dollars on research and development, and reinvesting in universities. The goal was not only to retain those Canadians who may otherwise emigrate, but to attract and retain global talent as well.

This policy appears to have had an effect. After 2000, rates of emigration began to drop and rates of return rose. While more Canadians still immigrate to the United States than return, fewer Canadians are going stateside than in the 1990s. The U.S. Canadian-born population decreased by 0.7 percent between 2000 and 2009 after growing by 10 percent in the previous decade. While the increased difficulty of visiting or immigrating to the United States after the events of 9/11 certainly played a role, the uptick in Canada's economic performance and the renaissance of its knowledge sector were also important factors.

Yet the Canadian government is still working to encourage expatriates from around the world to return. In 2010, it introduced a pilot program in Ontario that allows foreign-born partners of Canadian expatriates to immediately obtain work permits if their Canadian spouse returns, rather than being subject to the usual one-year waiting period. This benefit is currently on offer only to foreign professionals in health care and academics, and is scheduled to end on May 22, 2012. If it shows promise, however, the program may be expanded to other provinces, industries, or even country-wide.

Current Policy Debate

In terms of public opinion, Canadians have a more positive view of immigrants and immigration than do Americans and Western Europeans. They are less likely to view immigrants as "stealing" jobs or committing crimes, and the majority of Canadians view immigration as an opportunity, not a problem. Furthermore, only 17 percent of Canadians think there are "too many" immigrants in their country, compared to 37 percent of Americans and 59 percent of the British.

While Canadians are generally supportive of their immigration system, debates persist surrounding the types of immigrants admitted and their ability to economically integrate. Criticism has been lobbed at the current government for its apparent favoritism of economic migrants over family and humanitarian applicants, as many economic migrants may have little Canadian human capital or may have a difficult time finding work despite their individual capabilities. Furthermore, some find it problematic that large numbers of economic migrants continue to permanently settle in Canada — and in fact are encouraged to do so — even as the country experiences the effects of the global recession.

One such means by which the government of Canada encourages highly skilled economic migrants to remain in the country permanently is the Canadian Experience Class (CEC). Created in 2008, the CEC program aims to capitalize on temporary workers with Canadian work experience and education, and to retain their skills by granting them permanent residence.

Both temporary workers and graduates of Canadian universities are eligible to transition to permanent status through this program as long as they live outside of Quebec (due to the provisions of the Canada-Quebec Agreement) and work in a managerial, professional, or technical/skilled trade occupation. Those admitted through CEC are thought to have fewer potential difficulties in the workforce than other economic-class migrants given their prior experience in the Canadian context.

More controversially, in 2010 the Canadian government enacted a reform of the refugee and asylum program, called the Balanced Refugee Reform Act. Its goal is to address the large backlog of claims and the long wait times for hearings, in part through better identifying fraud. Applicants are now given a hearing date within 60 to 90 days of their initial interview (as opposed to within 18 months under the previous system). Claimants also now have the right of appeal under a newly created division, as well as the option of an assisted voluntary return.

The new system has been criticized for reducing the amount of time applicants and their lawyers have to prepare a case, and for switching the process of adjudication from independently staffed tribunals to civil servants. The argument is that this could provide the government with an unfair advantage in efficiently clearing out applications without providing claimants with due process.

Looking Ahead

Canada has one of the highest net immigration rates in the world, accepting more migrants per capita than Europe, Great Britain, and the United States. This trend is likely to remain a fixture of Canadian immigration policy and demography for the foreseeable future; so too is the emphasis on human capital, as immigration becomes ever more tightly weaved into economic policy. Important questions, however, are being asked about the social mobility opportunities that exist for immigrants, and the Canadian economy's ability to absorb foreign-born workers. The patterns of social and economic inclusion of immigrants will therefore likely remain a challenge for an increasingly diverse Canadian society.

Citizenship and Immigration Canada, Strategic Research and Statistics Division. 2010. Facts and Figures 2009: Immigration Overview—Permanent and Temporary Residents. Ottawa: Public Works and Government Services Canada.

Coates, Ken S., Robert Healy and William R. Morrison. 2002. Tracking the Snowbirds: Seasonal Migration from Canada to the U.S.A. and Mexico. American Review of Canadian Studies 32(3): 433-450.

Dion, Patrice and Mireille Vézina. 2010. Emigration from Canada to the United States from 2000 to 2006. Canadian Social Trends. Statistics Canada, Catalogue no. 11-008-X.